SEC: Startup’s CEO swindled investors, including accelerator
Blessing Egbon seemed like exactly the kind of successful young business entrepreneur any city would embrace, and he chose Milwaukee as home of Exit 7C, his fuel services startup.
Egbon, 34, had won support from gener8tor, a local startup accelerator that helps new businesses learn how to expand, grow and find funding and then raised more than $6 million from investors, including $50,000 from a nonprofit that supports minority entrepreneurs.
But now federal authorities say Egbon faked his success, lied to investors and spent their millions on looking successful — including $530,000 at “luxury nightclubs,” almost $270,000 on chartered jets and $62,500 on private villa rentals.
“We’re devastated to read these allegations,” said Joe Kirgues, a co-founder of gener8tor, which has had 135 companies go through its program.
“Having seen the level of due diligence, the bank audits, customer visits, we’re shocked at the level of fraud” that the SEC contends occurred, he said.
In a civil complaint filed this week, the Securities and Exchange Commission charged Egbon with fraud and misappropriation. It seeks to bar him from future work in securities and to claw back more than $2 million. It is not a criminal prosecution.
According to the complaint, Egbon founded the company as CoOp Fuels in Colorado in 2015, before changing its name to Exit 7C and moving to Milwaukee in 2016 to be part of a cohort of companies taking part in gener8tor’s class, a sort of boot camp for startups, selected from among hundreds of applicants, that would benefit from “acceleration.”
The complaint says Egbon lied about Exit 7C’s cash flow and operations in his application to gener8tor. In emails to investors and potential investors in early 2017, he said the company had more than $53,000 in bulk fuel sales that January and profit of more than $2,000.
At the time, according to the SEC, Exit 7C had no cash flow at all, and during its five years in existence, only grossed $400,000 with no profit from vehicle fleet maintenance work it did from 2018 to 2020.
Among investors in Exit 7C were BrightStar, St. Louis-based Arch Grants, 9Mile Labs, Accelprise, Comeback Capital, gener8tor, and a former Harley Davidson executive who personally put up $25,000.